May 3, 2013
Mortgage rates shot higher at their fastest pace in two months after this morning's hotly anticipated Employment Situation Report showed that job creation in April was better than expected. Stronger economic data tends to cause longer term interest rates to move higher. In addition to April's relative strength, the report also revised March's abysmal job creation of 88k payrolls up to more palatable 138k. This likely exacerbated the resulting weakness in bond markets as the March numbers (released on April 5th) were a big factor in the past month of improvements in mortgage rates. The average conventional 30yr Fixed rate for an ideal scenario had been edging down to 3.375%, and while that remains viable today, the average once again centers on 3.5%.
We characterized the decision to lock or float last night as a trip to the casino--one that depended on the result of this morning's data. If you didn't cash in your winnings yesterday, you still have some chips left. Today's rates are roughly back in line with those seen in mid-April, which--at the time--were very near the lows of 2013.
There's never any way to be sure what markets (and consequently, mortgage rates) will do in the future. What might seem like an oversized move higher today doesn't mean we're due a "bounce back" next week. Keep in mind that markets have essentially been waiting for the past three days of data and events for more than 2 weeks, and began getting out ahead of the possibility of a negative jobs report over the past few days. With that squashed, rates have moved with uncanny perfection right back to the levels seen when they first began that indecisive, sideways movement in mid April. Things can go either way on Monday and rates are still much nearer recent lows than highs. Lock or float accordingly.
Loan Originator Perspectives
“Rates worsened over a ½% in pricing (not rate) today as a strong April jobs report surprised bond traders. With other data pointing to a soft (or worse) US economy, MBS market expected far fewer jobs to be created, especially the revisions to previous months’ reports. We suggested most folks lock earlier this week, and those who did were rewarded with year’s best pricing. Biggest impacts borrowers will feel from today’s movement are lower lender credits and higher net closing costs, rather than higher rates.” -Ted Rood, Senior Originator, Wintrust Mortgage
"I'm usually not so explicit ahead of jobs reports because they're notoriously hard to predict, but I had a clear locking bias yesterday and it turned out well for clients who listened. As for where we go from here is harder to tell for now. Today's selloff wipes away gains of the past two weeks, and the 2013 rate lows we were enjoying are in the rearview mirror for now. Stay tuned to this page next week to see whether this selloff (and rate spike) gets worse or levels off. " -Julian Hebron, Branch Manager, RPM Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75-2.875%
- 5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- After rising consistently from all-time lows in September and October 2012, rates are challenging the long term trend higher
- Some level of panic over the European situation has returned, to the benefit of domestic interest rates.
- Domestic economic weakness has played a role in helping balance the outlook for Fed bond-buying.
- We're at a crossroads where we'll soon see if the "rising rate environment" remains intact or is successfully challenged.
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).